Tariffs and uncertainty are slowing down the world

The first 100 days with President Donald Trump in the White House have been dramatic and the economic situation is unusually uncertain, interesting and exciting.

The first 100 days with President Donald Trump in the White House have been dramatic. We expected a flying start to his new term of office and an aggressive stance on both foreign and economic policy issues. Yet we managed to be surprised by the barrage of initiatives, changes, threats, tariffs, verbal assaults and retreats that we have seen since the inauguration on January 20. The United States, the White House and Trump have dominated the news flow. Opinions about his policies are, as usual, polarised. His supporters see a president who delivers on his election promises and corrects the world’s injustices with vigour and energy. His critics see careless and illogical policies that are sinking the economy, disregarding democratic principles, and increasing global uncertainty. 

For those interested in economics, it has been a busy period. The biggest focus of attention is the ongoing tariff and trade war. After many rounds of imposing, withdrawing and pausing tariffs, the US currently has a “baseline” tariff of 10 per cent against most countries and a staggering 145 per cent tariff against China. Then there are exemptions, with both higher and lower tariffs for certain product groups. Significantly higher tariffs, which Trump calls “reciprocal”, are on hold for the time being but may be reintroduced when a 90-day pause ends this summer. Negotiations are under way to conclude new agreements. But time is short, and no one knows if these agreements will be signed or what they will look like. 

The confusion surrounding tariffs, trade and global relations is having a major impact on the economic outlook. Uncertainty is making investment decisions more difficult and both businesses and households more cautious. Trade and demand are negatively affected, and the global growth outlook has been lowered. At present, it looks as if the US will be hardest hit in the form of both slower growth and upward inflation pressure. But the effects are uncertain, and forecasts can change rapidly in this environment. In a longer perspective, serious questions are also being asked about how the financial and economic world order will look. Declining international confidence in American policies has led to doubts about the role of both the US dollar as the world’s reserve currency and US Treasury bonds as the safest asset in the financial system.

Away from the epicentre of the trade war ‒ the conflict between the US and China ‒ Europe has also had a lot to think about. Growth is being slowed down by the tariff war but may be supported by major investment decisions. Above all, the defence sector must be strengthened now that the alliance with the US is weakening, and a more uncertain world order is emerging. In Sweden, households have continued to hold a bit more tightly onto their wallets than growth would need. We have seen a certain increase in consumption, supported by rising real wages and lower interest rates, but willingness to spend is still being held back by uncertainty, high prices and unstable markets. We are thus lowering our forecast for Swedish growth, but we still believe there is good potential for an acceleration during the second half of this year. 

JOverall, the economic situation is unusually uncertain, interesting and exciting, and we look forward to continuing to monitor and discuss it with you.

This May 2025 issue of Nordic Outlook also includes in-depth themes that address the following topics:

• Global trade
• Currencies – focus on the USD and SEK
• A new geofinancial world
• A fragmented energy transition